Can Collections Agencies Sue You? Can They Garnish Wages?

Unpaid invoices and overdue accounts can create significant stress for any business owner. As accounts receivable age, the question of how to recover that money becomes more urgent. This often leads business owners to wonder about the extent of a collections agency’s power. Can they take legal action against debtors? Can they go as far as garnishing wages? Understanding the debt recovery process is key to managing your finances and protecting your business.

When you’re juggling daily operations, chasing down payments is the last thing you want to do. Let’s explore the legal avenues available in the debt collection process and how a professional agency can navigate this complex landscape for you.

The Reality of Debt Collection and Legal Action

The short answer is yes, a collections agency can sue on behalf of a creditor. However, this is typically a last resort. The primary goal of any debt collection effort is to open a line of communication with debtors and arrange for payment without involving the courts. This initial phase, sometimes called pre-collections, focuses on negotiation and creating manageable repayment plans.

For a business, handing over a delinquent account to a collections agency means you are authorizing them to act on your behalf to recover the outstanding funds. Professional agencies operate within strict legal frameworks, ensuring all actions are compliant and ethical.

When Does a Lawsuit Become Necessary?

A lawsuit is usually considered when:

• The debtor refuses to communicate or cooperate.
• The debtor disputes the debt without valid reason.
• The amount owed is substantial enough to warrant legal costs.
• The statute of limitations for collecting the debt is approaching.

In Canada, the legal process for debt recovery often involves the small claims court system, which is designed to handle monetary disputes in a more streamlined and less costly manner than higher courts. A reputable collections agency has the expertise to manage this entire process, from filing the initial claim to representing your interests in court.

Understanding Wage Garnishment

Wage garnishment is a legal tool that can be used to recover a debt, but it is not something a collections agency can do on its own. It is a court-ordered action that happens after a lawsuit has been successfully won by the creditor.

How Does Wage Garnishment Work in Canada?

1. Obtain a Judgment: First, the collections agency, acting for your business, must sue the debtor and win the case. The court will then issue a judgment in your favor, legally confirming that the debt is owed.
2. File for Garnishment: With a court judgment in hand, a request can be made to the court to issue a “Garnishing Order.” This order is sent to the debtor’s employer.
3. Deduct from Wages: The employer is then legally required to deduct a certain percentage of the debtor’s wages and send it directly to the creditor (or the collections agency on their behalf) until the debt is paid in full.

Provincial laws in places like Ontario, British Columbia, and Alberta dictate the percentage of wages that can be garnished. These laws are in place to ensure the debtor still has enough income to cover basic living expenses. Navigating these provincial regulations requires specialized knowledge, which is a key service a professional agency provides.

Why Partner with a Professional Collections Agency?

Managing overdue accounts receivable can drain your time and resources. Attempting to navigate the legal system for debt recovery on your own adds another layer of complexity. Partnering with an experienced collections agency like Go Beyond offers a clear advantage.

We handle the entire debt collection lifecycle with professionalism and transparency. Our process starts with respectful communication and negotiation, aiming to resolve accounts without legal action. However, when debtors are non-responsive, we have the expertise and resources to pursue legal avenues, including small claims court and, if necessary, wage garnishment proceedings.

Our teams are specialized in various industries and understand the nuances of debt recovery across Canada. By entrusting your collections to us, you free up your team to focus on what they do best—growing your business. We take on the difficult conversations and complex legal procedures to improve your cash flow and achieve a higher rate of successful debt recovery.

Don’t let unpaid accounts negatively impact your bottom line. Take control of your accounts receivable and let a professional team manage the challenges of debt collection for you.